The Syrian sell-off caused investor sentiment to reach extreme pessimism levels in the short-term. Bearish investor sentiment is generally an inverse, short-term indicator. In the past two days, stocks have rebounded off of lows. Yesterday, we saw a steady stream of call buyers in the S&P 500 (SPY) and the financials ETF (XLF). This marked two days of heavy call buying with September and October expirations being the most active.
The U.S. stock market has proven to be very resilient in 2013. While volatility is emotionally difficult to stomach, 2013 has so far been a year when it has paid not to over trade. The Delta Market Sentiment Indicator (MSI) remains bullish this week. We trust a disciplined, systematic method of measuring market risk rather than our emotions. Stay long.